IRA Contribution Limits And 401k Contribution Limits, 2009
Before January 2009 is over, I just want to go over some of the contribution limits for retirement plans. In particular, the ones that most people interested in are 401k and individual retirement account (IRA). This year, there’s no change to IRA contribution limit, but 401k contribution limit increased from $15,500 to $16,500.
IRA Contribution Limits and Phase Out
The contribution limit for IRA did not change for 2009 as you can contribute up to $5,000. If you are 50 years and older, your contribution limit is $6,000 (due to $1,000 catch-up contribution allowance). Note this is a per individual limit and as a married couple, the contribution limits are effectively $10,000 to $12,000 combined.
It’s important to know that the limit applies to the combination of both Traditional and Roth IRA. In other words, you can contribute up to $5,000 in any combination. For example, if you contribute $3,000 to Traditional IRA, you can only contribute $2,000 to Roth IRA — not $5,000 each.
The follow tables show the contribution limits for IRA, along with the catch-up contribution amount for individuals 50 and older:
Contribution Limits for Traditional IRA and Roth IRA
| Year | Contribution Limit | Catch-up |
|---|---|---|
| 2008 | $5,000 | $1,000 |
| 2009 | $5,000 | $1,000 |
Phase Out for Traditional IRA and Roth IRA
Please note that there are phase out limits depending on your income tax filing status, and you may not contribute up to the $5,000 maximum contribution limit. The phase out limits are based on your Modified Adjusted Gross Income (MAGI), which is calculated on your tax form. Roth IRA eligibility begins phasing out with a MAGI above $105,000 for single filers, and above $166,000 for married filing jointly. Single filers with a MAGI above $120,000 and married filing jointly with a MAGI above $176,000 are not eligible for Roth IRA contributions.
For Traditional IRA, the phase out begins at $53,000 and ends at $63,000 for single filers, and from $85,000 to $105,000 for married filing jointly. Please note that you can still contribute to a Traditional IRA if your MAGI is above the phase out limits; however, you will not be able to deduct your contributions for tax purpose.
| IRA Type | Single | Married Filing Jointly |
|---|---|---|
| Roth IRA | $105,000 – $120,000 | $166,000 – $176,000 |
| Traditional IRA | $55,000 – $65,000 | $89,000 – $109,000 |
401k Contribution Limits
The contribution limit for 401k increased from $15,500 to $16,500 in 2009, and catch-up contribution limit increased from $5,000 to $5,500. The follow tables show the contribution limits for 401k, along with the catch-up contribution amount for individuals 50 and older:
Contribution Limits for 401k
| Year | Contribution Limit | Catch-up |
|---|---|---|
| 2008 | $15,500 | $5,000 |
| 2009 | $16,500 | $5,500 |
Conclusion
If you normally contribute the maximum amount to these plans, this is a good time to make adjustment to your401k contribution and start thinking about how you can achieve the maximum contribution limits for your IRA. I hope you find this information article helpful. For more information, please visit the IRS web site, or consult a tax professional.
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You can contribute to 2008 Roth until April right?
@Jackie – Yes, you can contribute to 2008 IRA up until the tax filing deadline in April.
Sadly, I could not max out my IRA this year as I need to keep my money in savings to pay for my last semester and a half of college. Maybe if I get a good internship I will be able to put some in for 2009.
1 question: If you put money in a Roth IRA, are you allowed to take it out at anytime for any reason (principle only). I read this somewhere else and wiki agreed, but when I look at the tax documents, it looks like you are not allowed to. (potential blog topic!)
@Sam – Yes, you can withdraw the principal from Roth IRA. There’s a good article at My Money Blog:
http://www.mymoneyblog.com/arc.....nalty.html
Is there anything special I need to do in order to contribute towards 2008 Roth IRA limit? Specifically, I just set up my Roth this past week and want to begin contributing immediately. Do I just contribute up to $5000 until April and then file? Any additional info you can offer is greatly appreciated.
Thanks!
@Atlantic – Since we are in 2009. You need to tell your financial institution that you are contributing toward 2008 IRA, which you can do up to tax filing deadline. To be safe, you should also write this on the check.
Thanks Pinyo!
I believe the income phaseout for regular IRA deduction only exists if you are eligible to contribute to a “qualified plan” (401(k), 403 (b), etc.). If you are not eligible there are no phaseouts for deduction.
I contributed 6-7K in my 401K this year. Can I still make my 5k contribution to a regular IRA as well for 2008? I exceed the income limit for a single person for a ROTH IRA.
@Justin – Regular IRA has lower phase out than Roth IRA. If you are not eligible for Roth, you won’t be eligible for Regular IRA either.
Can I contribute the maximum $16,500 toward my 401K and still max out $5,000 toward my IRA? Thanks!
@Matthew – I don’t have the specific information because I usually rely on my tax software to let me know where I stand. But here’s the deal, my parents both contributed to their 401k (mom maxed out, but dad didn’t), but they weren’t able to contribute to Traditional IRA. However, I was able to contribute to my 401k (maximum) and am able to contribute to Roth IRA (maximum).
Useful information. Here is a breakdown of Roth IRA Income Phaseout Ranges For 2007 & 2008 Contributions
Source: 401k http://www.401klookup.com
over 65, on my 2009 taxes, can I deduct $6000,00 if I take out $6000,00 from my 401(K) plan or did that apply only to a IRA?
@Jean – If you take money out from 401k, you can’t deduct. At 65, you can withdraw from both 401k and IRA without the early withdrawal penalty. However, you do have to pay taxes for your 401k and Traditional IRA withdrawal. Roth IRA withdrawal is tax-free.
@Pinyo – Jean can only withdraw tax-free and penalty-free from her Roth IRA if she’s also met the 5 year holding period, meaning her account must be open and funded for at least five years first.
That said, original principal contributions to a Roth IRA can always be withdrawn tax-free and penalty-free, and since the IRS requires original contributions be totally withdrawn before you even begin to withdraw investment gains, it might be a moot point…
@Britt – Thank you for the clarification. I appreciate it!
Thanks for this resource. Here’s an interesting question. I paid into the Roth IRA as usual. I got a substantial change in income unexpectedly that put me over the eligibility limit. Should I just pay the penalty, or can I somehow withdraw those funds, pay tax on gains, and then put it somewhere else?
@Kevin – I am not sure what the answer is so I posted your question here: http://answers.moolanomy.com/2.....-withdraw/
I am confused about MAGI calculations. So need help with the following:
SCENARIO 1: My total compensation in 2009 is 119K of which I have received 103K and 16K invested in 401K (this does not include the employer match). What is my MAGI? Am i still elligible to invest in IRA for 2009? how much?
SCENARIO 2: My total compensation in 2009 is 121K of which I have received 105K and 16K invested in 401K (this does not include the employer match). Am i still elligible to invest in IRA for 2009? how much?
I have a question. I have an IRA and for 2009 I did not pay anything in to or take anything out of. I did not receive a 1099 do I need to report anything on my taxes?